Carnival Cruises 2007 Annual Report Download - page 28

CARNIVAL CORPORATION & PLC | 25
Stock Option Plans
The Committee generally sets stock option exercise prices at 100% or more of the fair market value of the underlying common
stock/ordinary shares on the date the option is granted. All stock options granted during fiscal 2007, 2006 and 2005 were granted
at an exercise price per share equal to or greater than the fair market value of the Carnival Corporation common stock and Carnival
plc ordinary shares on the date of grant. Generally employee options either vest evenly over five years or at the end of three years.
Our employee options granted prior to October 2005 have a ten-year term and those options granted thereafter have a seven-year
term. In the fourth quarter of fiscal 2007, the Committee decided to cease granting employee stock options, and to grant restricted
stock units (“RSUs”) or restricted stock awards (“RSAs”) to our employees who were previously granted options. This change
from options to RSUs/RSAs will enable us to have a more uniform method of granting incentive awards to our employees. Since
fiscal 2001, Carnival Corporation director options vest evenly over five years and have a ten-year term.
A combined summary of Carnival Corporation and Carnival plc stock option activity during the year ended November 30, 2007
was as follows:
Weighted- Weighted-Average Aggregate
Average Remaining Intrinsic
Shares Exercise Price Contractual Term Value(a)
(in years) (in millions)
Outstanding at November 30, 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,521,999 $42.55
Granted(b) ......................................................... 289,745 $49.98
Exercised ......................................................... (1,696,029) $31.18
Forfeited or expired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (398,823) $48.12
Outstanding at November 30, 2007 .................................... 17,716,892 $44.22 5.1 $87
Exercisable at November 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,533,021 $41.61 4.6 $76
(a) The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the option exercise price at November 30, 2007.
(b) The October 2007 annual grant of options to certain employees was not made, and it is expected to be replaced with a February 2008 grant of RSUs/RSAs.
As of the dates of exercise, the total intrinsic value of options
exercised in fiscal 2007, 2006 and 2005 was $31 million, $48
million and $37 million, respectively. As of November 30, 2007,
there was $47 million of total unrecognized compensation
cost related to unvested stock options. This cost is expected
to be recognized over a weighted-average period of 1.7 years.
Restricted Stock Awards and Restricted Stock Units
RSAs generally have the same rights as Carnival Corporation
common stock, except for transfer restrictions and forfeiture
provisions. Prior to fiscal 2006, unearned stock compensation
was recorded within shareholders’ equity at the date of award
based on the quoted market price of the Carnival Corporation
common stock on the date of grant. In fiscal 2006 upon adop-
tion of SFAS No. 123(R), the $13 million of unearned stock
compensation as of November 30, 2005 was required to be
charged against additional paid-in capital. RSAs have been
granted to certain officers and non-executive board members
and either have three or five-year cliff vesting or vest evenly
over five years after the grant date. In addition, Carnival
Corporation and Carnival plc grant RSUs that vest evenly over
five years or at the end of three or five years after the grant
date and accrue dividend equivalents on each outstanding
RSU, in the form of additional RSUs, based on dividends
declared. The share-based compensation expense associated
with RSAs and RSUs is based on the quoted market price of
the Carnival Corporation or Carnival plc shares on the date
of grant, and is amortized to expense using the straight-line
method from the grant date through the earlier of the vesting
date or the estimated retirement eligibility date.